RE:Closed my SU trading positionAs per what I have posting re strategy regarding oil prices and buying some SU when the oil price is below 85 as a trading position, I did the same this morning and sold the extra trading shares for a decent profit. I still hold my core underweight position.
If the oil price goes back down towards 80 I will likely buy some more as a trading position.
IMO we will continue to see volatility (music to Migraine's ears...lol) as the market sorts things out and according to my scenario sees that interest rates are destined to go a lot higher. When that happens I will likely increase my cash position from the current levels.
I agree that Powell will raise the rate another 75 basis points at the next meeting but that will not be the end of it. As I have posted many times before, the Fed and for that matter all major Central Banks are behind the curve. If you look at a long term chart of the Fed discount rate vs inflation you will see that whenever the Fed rate stays below the inflation rate for a period of time, the Fed ends up increasing the discount rate to levels significantly above the inflation rate.
Not scare anyone. We are all grownups here, but if my scenario based on wage inflation proves accurate, combined with what I just said, the Fed discount rate could go as high as 7-8%. At these rates, the Charlie Munger statement in the video I posted the other day would become a reality. We are not there yet but IMO smart money will be watching this very carefully.
The another factor in all this is that the Fed is also reducing the size of its balance sheet (albeit in slow and methodical way which is a good thing). So while people are focussed on the discount rate, reducing the size of the balance sheet also reduces the money supply and in effect increases the economic impact of the interest rate tightening.